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QS 11-7 Accounting for small stock dividend LO P2 The stockholders equity section of Jun Companys balance sheet as of April

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Answer #1

Before stock dividend:

Number of shares outstanding = 220,000

Number of shares issued as dividend = 20% * Number of shares outstanding
Number of shares issued as dividend = 20% * 220,000
Number of shares issued as dividend = 44,000

Increase in common stock = Number of shares issued as dividend * Par value per share
Increase in common stock = 44,000 * $5
Increase in common stock = $220,000

Decrease in retained earnings = Number of shares issued as dividend * Market price per share
Decrease in retained earnings = 44,000 * $15
Decrease in retained earnings = $660,000

Increase in paid-in capital in excess of par value, common stock = Decrease in retained earnings - Increase in common stock
Increase in paid-in capital in excess of par value, common stock = $660,000 - $220,000
Increase in paid-in capital in excess of par value, common stock = $440,000

JUN COMPANY Stockholders Equity April 2 (after stock dividend) Common stock Paid-in capital in excess of par value, common s

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